Belarusians are well-prepared for devaluation

On November 14th, the National Bank published data on deposits in Belarus’ banking system.

Signs of economic crisis in Belarus have encouraged Belarusians to secure their savings. A one-time devaluation will not harm people’s savings. Belarusians have learnt their lesson from the 2011 devaluation and have improved their ruble-assets managements.

One of the reasons why international reserves have been shrinking since January 2011 is that the population have been converting ruble savings into foreign currency. In October, citizens bought USD 255.3 million in cash and USD 124.2 million non-cashed. The main reason was the deteriorating economic situation in Belarus and people’s expectations of devaluation.

The authorities have been persistently denying devaluation, but if a one-time devaluation happens, the population will suffer minor losses. As of November 1st, 2013 only 32.6 % of all savings in the banking system were in local currency. The most popular deposits in national currency are for an ultra short period of time (10-15 days) at more than 50% per annum. Even if the ruble is devalued, losses will be partially offset by high interest rates on deposits. Some citizens in anticipation of devaluation borrow in local currency at 60 % per annum and higher, hoping that devaluation will reduce the cost of purchased goods using consumer loans.

The population has learnt the lessons from two devaluations in 2009 and 2011. The first lesson: not to keep the bulk of the money in local currency. In 2008, savings in national currency were 67% of all citizens’ savings in banks, after the 2011 devaluation at least 60% of savings were in foreign currencies. The second lesson: to hedge risks. People have converted their savings into gold, currency baskets, real estate and so on in order to minimize losses in case of devaluation. The third lesson: if authorities say there will be no devaluation, most likely, it means the opposite. The authorities have never acknowledged that the devaluation was the outcome of their actions. Those who do not learn from their mistakes, repeat them in the future. And Belarus has proved this rule well.

With the devaluation, the authorities have ensured citizens’ distrust toward the national currency as a means of savings. Trust in the national currency will be regained only if it proves its stability in the longer term and if risks to lose savings disappear for about two years.